Cloud Computing for Dogs, Cats, Iguanas, Parakeets…

It looks like animal diagnostics company IDEXX Laboratories (Nasdaq: IDXX) has learned a new trick.

The company revealed two new Web applications days before releasing its Q2 2012 earnings last week: VetConnect PLUS provides a convenient interface between veterinarians and the diagnostic labs at IDEXX while Pet Health Network Pro helps relay these medical results and additional educational information from the veterinarian's office to pet owners. Both electronic services, which use cloud-computing technology, help vets store medical records, visualize laboratory results, and inform pet owners about the health of their pets.

Best of all, IDEXX is offering one of these services for free. Well, almost for free.

Barking up the right treeVeterinary practices must use IDEXX's diagnostic labs or other services in order to access VetConnect PLUS. Pet diagnostics, after all, are IDEXX's core business. They comprised 82% of the company's sales in fiscal 2011 and brought in close to $1 billion in revenue. IDEXX is willing to take a small hit on providing a free Web-based application if it can help retain existing customers, attract more veterinary practices to its services, and consolidate its standing as a leading animal diagnostics company in the U.S.

VCA Antech (Nasdaq: WOOF) and Abaxis (Nasdaq: ABAX) compete in the same market segment, and reported revenue of $316.8 million and $108.4 million, respectively, for their veterinary diagnostic divisions in fiscal 2011. IDEXX is the clear leader in terms of revenue, but all three offer similar services and compete on price, quality, and convenience. Providing diagnostic results online is not unique to IDEXX, but the company has differentiated its business by offering veterinarians a new way to communicate diagnostic and appointment information directly with pet owners.

Healthy as a horseIDEXX's strategic use of cloud computing will undoubtedly bolster already strong sales in its veterinary division, which experienced 7.1% year-over-year growth in the second quarter of 2012. The company's smaller water quality testing division grew 2.2% compared to the same quarter in 2011, and revenue from the livestock and poultry group decreased by more than 9% year over year. This decline may seem alarming, but this division only accounts for approximately 6.9% of IDEXX's total sales. Strong sales from the veterinary division easily absorbed this loss. Overall, the company reported total revenue growth of 6% this quarter compared to Q2 2011, and a solid 10% rise in earnings per diluted share.

Overall, IDEXX is a financially healthy company that is experiencing moderate growth through a proven business model and product innovation. I've added it to my CAPS watchlist, and you can do the same by clicking here.

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